Two high-profile reports on home sales this week confirmed that the housing market is still mired in a deep slump with prices still falling and sales activity sluggish at best. In fact, the market may be in much worse shape than even those numbers suggest.

Figures from the National Association of Realtors that are among the most closely watched indicators on the housing market have been called into question by economists who say they may overstate existing-home sales activity by up to 20 percent.

The issue is more than just an academic dispute among economists. Without a working barometer, it's hard to see the next storm coming.

"It's very important for the industry but also for policy makers," said Mike Fratantoni, head of research at the Mortgage Bankers Association, one of the groups that is challenging the Realtors' data.

"Folks at the Fed and at the Treasury and anyone involved in economic policy throughout government are very concerned about the health of the housing market. So if your primary indicator is giving you an overly optimistic reading, that's cause for concern," he said.

The Realtors, a trade group of licensed real estate agents and brokers, concede that there has probably been some "upward drift" in its numbers since the unprecedented collapse of the housing market in 2006. But Realtors spokesman Walter Molony says the group's data still accurately track the monthly ups and downs of home sales, providing valuable insight into sales trends.

"In terms of broad market characterizations, it's really not that big of a deal," said Molony.

But if the data is as badly flawed as critics fear, it could be a big deal for home buyers and sellers because it could mean prices are more likely to head even lower. That's because an unrealistically optimistic assessment of the pace of home sales could be artificially buoying home prices.

The possible breakdown of the barometer couldn't come at a worse time for the housing industry. After signs of life last year — helped by generous government tax breaks—there are ominous signs that those incentives simply pulled future sales forward.

Analysts have theorized that new-home sales have been hurt because prices of existing homes have fallen more quickly, making them relative bargains. But analysts have been unsettled by data suggesting that the housing market is headed into another leg down for sales and prices.

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"This is really unknown territory for us," said Evan Barrington, head of economic analysis at The Stephenson Company, a market research firm. "We haven’t been through this before."

'Upward drift'
One reason for concern about the Realtors' data is that when assessing the outlook for future sales, forecasters rely heavily on the inventory of homes on the market, which is generally expressed in number of "months' supply."

That number is derived by comparing the number of unsold homes and the current pace of sales. Prices tend to be fairly stable when the market has about six to eight months' worth of unsold homes. Tighter supplies tend to push prices higher, bigger supplies tend to depress prices.

According to the NAR's latest monthly data, the number of unsold homes in February represents an 8.6-month supply at the current sales pace, based on an annual sales rate of 4.88 million.

But other measures — including mortgage data tracked by the mortgage bankers, show a much lower sales pace. Private research firm CoreLogic, which counts closings filed in more than 2,000 counties, says the pace of home sales in February was just 3.6 million units on an annual basis. If true, that means the inventory of unsold houses is more like 17 months' supply, or roughly double the level reported by the NAR, according to Mark Fleming, chief economist at CoreLogic.

"(Overstating the pace of homes sales) makes a big difference in terms of that month's supply measure," said Fleming. "That implies significant downward price pressure — which we're actually observing. Prices are falling month over month — and year over year again — at a pretty significant pace at the moment.

So what could account for such a substantial overcounting of home sales?

To begin with, monthly statistics like home sales data are the murky underpinnings of economics - a prime example of why it's called the "dismal science." Almost all economic statistics — from widely watched employment data to more obscure measures of industrial output - are only estimates based on data samples that are designed to stand in for a more complete reporting that would take months or years.

In the case of NAR's existing home sales report, the association polls about 40 percent of its members and logs sales based on the widely used Multiple Listing Service. Up until 2010, it periodically "benchmarked" its data based on the more complete count conducted by the U.S. Census.

Unfortunately, the Census dropped several key questions about housing in the 2010 Census, which left the NAR without that data set to recalibrate its own data series.

"That kind of threw a monkey wrench in the works for us," said Molony.

The collapse of the housing industry may also have played a role, according to housing economists who are talking a closer look at the data. One theory is that the consolidation of the housing industry also brought a consolidation among real estate agencies that the NAR's model hasn't kept up with. An agency used in the NARs sample, for example, may have increased sales because it acquired smaller agencies, not because sales in that market rose.

Moloney said the NAR is working with the Federal Reserve, Fannie Mae, the Federal Housing Finance Agency, the MBA, Corelogic and academic economists to get its monthly sales data back on track.

"It's a normal process, but now we have to obtain a consensus with a lot of parties," he said.

That could be a big challenge, given the number of businesses that keep an close eye on the NAR data.

The housing industry's outsized role in the U.S. economy touches thousands of businesses whose sales rely heavily on the level of home sales. From appliance makers to home improvement centers, businesses have to decide month-to-month how many workers to hire and how much inventory to stock. The NAR's monthly number is one of the most critical pieces of data they rely on to make the right decision.

Video: New report: 23% of homeowners underwater

Closed captioning of: New report: 23% of homeowners underwater

>>>on the
housing market
. foreclosure filings fell 14% last month. that's a 27% drop from a year ago. might be good news there. one in every 577 homes got a foreclosure filing in february, though. but realtytrac points out those numbers may be artificially low because of the foreclosure paperwork fiasco delaying the inevitable for some home owners that were behind on their payments. and then in another sign of trouble, the
housing market
, a new report finds 23% nearly 1 in 4, by the way, home owners here, are under water on their mortgage. that means they owe more than their home is worth. i want to bring in oxford economist and former consultant to the
world bank
. her latest book was "how the

west was lost:50 years of economic folly and the stark choices ahead." as we look at all these very did i feel indicator, some of them lagging and some of the leading ones, as well, it doesn't look positive. we try to be positive. i want to go back to what you said in the past. the u.s. could be going bankrupt because of the things that we're seeing.

>>absolutely. i mean, i think we're still incredibly concerned about this overhang in the
housing market
. foreclosures and what you just said here about a lot of houses still essentially being under water. obviously the greatest concern now is oil prices and what this means for interest rates and ultimately how this feeds through into other
asset classes
, including the
housing market
.

>>dambisa, you talk about culture as a driving factor.
suze orman
said this about the culture in the
united states
this morning.

>>america has gone from a country where your desire to own a home has now gone to a country whose desire to get out of the home that you own and rent an parm is more prevalent than ever before.

>>dambisa, two parts to that. one was the culture of we need to own a home. is that what drove us
over the edge
?

>>remember the whole idea of owning a home is underpinned by
government policy
. in the
united states
they have a policy called housing for all, which on the surface of it sounds like a great idea. but obviously the matter in which it was implemented is incredibly detrimental. it's a policy.

>>you also talk about the culture of borrowing.

>>yes. clearly there's nothing wrong with borrowing
per se
, but if you're borrowing to invest you end up in a different path of income than if you borrow for consumption, which has happened extensively not just at the government level but also at the individual level.

>>you also take a look at some of the successful economies in your book again as we were looking at how the west was lost. we appreciate you stopping by.